Do Pandemic Bonds Work?

Long before the novel coronavirus appeared, Olga Jonas was fretting about the next global health crisis. As a World Bank macroeconomist in 2005, she was in the department that helped coordinate the response to avian flu and saw how ill-equipped the poorest countries were to fight a serious epidemic. When an Ebola outbreak afflicted West Africa in 2014, she hoped it would fuel a global consensus behind building local capacities to intervene early. Instead, she says, she was disappointed that the World Bank opted to issue “pandemic bonds” designed to bring in investors to bear some of the cost of containing future outbreaks. The 2017 sale of $320 million of the bonds offered premiums of 11.5% or 6.9%, depending on the risk investors were willing to bear, with the cost borne by Japan, Germany, and funds from the International Development Association. In this edited excerpt of their February discussion on the Odd Lots podcast, Tracy Alloway spoke with Jonas, now at the Harvard Global Health Institute, about the idea behind the bonds and the damage pandemics can wreak on economies. (Run BPOD to find Odd Lots and other Bloomberg podcasts.)

So how exactly are these bonds supposed to work? How does the money get to the World Bank?